EMERGING MARKETS-S. African rand rises with eyes on budget; weak U.S. data dulls sentiment
* Markets are optimistic about S. African budget – Stan Chart
* Russian rouble down; oil slips, EU to impose sanctions in March
* Turkish interest rates to ease to 14% in 2021 second half – CS
* MSCI EM FX, stocks indices set to end week lower
Feb 19 (Reuters) – South Africa’s rand edged up on Friday ahead of a budget speech next week, while a softer dollar limited losses for most other emerging market currencies after weak U.S. jobs data dulled hopes of a global economic recovery.
The rand rose 0.3%, extending gains to a third consecutive session, with investors keenly looking forward to an update on the fiscal status of the local economy from Finance Minister Tito Mboweni in his budget speech on Wednesday.
“Markets are optimistic about the outcome,” said Razia Khan, head of research, Africa and Middle East at Standard Chartered Bank, citing a pick up in economic growth since the third quarter of 2020. “Expectations of downward revisions to previously outlined fiscal deficits now shape the market consensus.”
Against a dollar weakened by data showing a surprise rise in U.S. jobless claims overnight, MSCI’s index of emerging market currencies rose 0.2% led by chunky gains in the Chinese yuan. On the week, however, the EM currency index is set to end about 0.1% lower.
Russia’s rouble fell, in line with declining oil prices. Diplomats said the European Union is set to impose travel bans and asset freezes on allies of Russian President Vladimir Putin in March, in response to the jailing of Putin’s main domestic critic Alexei Navalny.
Investors have been keeping an eye out for economically or geo-politically damaging sanctions from the West on Russia, which could dent the outlook for local assets.
Meanwhile, a report on Friday cited central bank governor Elvira Nabiullina as saying they have not yet ruled out the possibility of increasing the key interest rate in 2021.
Turkey’s lira was flat a day after the central bank left the key interest rate unchanged at 17% and maintained a hawkish tone. Credit Suisse analyst Berna Bayazitoglu now expects the bank to ease gradually to 14.00% in the second half of the year.
The lira is set to extend weekly gains to a fifth straight week as hopes of tight monetary policy for some time to come kept up interest in the currency.
Among stocks, main indexes in Asia as well as the Europe, Middle East and African regions were mixed, although an index of EM stocks rose 0.1% to resume a winning streak as heavy-weight China stocks rose.
Thursday’s declines in the EM index were steep enough to counter gains made on other days, putting it on course to end the week on a slightly weaker note.
For GRAPHIC on emerging market FX performance 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2020, see tmsnrt.rs/2OusNdX
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